Volume/Volatility

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What is tick volume? The tick volume indicator is measuring every trade whether up or down and the volume that accompanies those trades for a given time period. If you are a day trader or a short term swing trader, tick volume analysis will assist you in sizing up the market on an intraday basis. Some traders also refer to tick volume as on-balance volume.

When analyzing the market at large, traders often focus on pivot points to look for changes or continuation in trends. This is where all the money is made and lost.

In order to trade this effectively, a trader will want to obtain an edge that will assist them in determining whether a pivot has the strength to hold the current trend.

While many traders have access to volume on a chart, the one thing that volume charts do not show you is the volume that takes place at a given price. Would you want to buy a break of the last swing point, if you knew that it was broken on high volume?

Well maybe you would, but it does not hurt to know what is going on at this critical level.

The tick volume indicator provides traders with this detailed breakdown of the trading activity at a given level. The tick volume indicator is critical for futures traders, because it is used to assess pivot points, since tick volume is not available for the futures markets.

• Identify a pivot point
• Analyze tick volume of pivot point
• Compare volume on retest of pivot point
• Analyze price action on retest of pivot point
• Initiate trade based on price and tick volume at pivot point

credit to mql5 community

Forex volume is probably one of the most misunderstood, yet most important tools traders have at their disposal.

In other financial markets such as stocks and futures, traders almost exclusively use volume to make trading decisions, however, in forex markets, traders are often quick to overlook what can be an incredibly useful tool.

So what is forex volume? Effectively every time a trade is executed the volume of the quantity traded can be calculated.

Calculating forex volume is made a little harder because there is no centralized exchange. Forex is a decentralized OTC product. For that reason, volume that takes place is based only on the individual pair on a given exchange at that point in time. Which is effectively just broker data.

That’s the main reason many traders are quick to discount the value of forex volume in their analysis.

There is also the other issue that prices move based on big institutional order flow. Much of the volume data that is available is from brokers who specialize in retail clients and the forex volume isn’t indicative of the price action we have seen.

So that can cause issues when looking at forex volume and trying to use it as some sort of indicator. However, there are ways we can still use forex volume and make it work for us.

Even though we don’t have a centralized exchange when trading forex, there are still some large exchanges that do significant volume on a daily basis.

So the way to think of volume data is that it is a snapshot of what the larger institutional players might be doing.

Regardless of the total volume, traders accumulate positions and buy and sell in similar areas.

The higher timeframe institutional money will still be entering the market and we won’t be able to see all that volume on a chart, but the general trend or idea will be there and it will be enough for us to make some trading decisions.

Credit to mql5 community

Volatility in the Forex Market as one of trading method is something you can imagine like this. During one day the price of a trading pair jumps up and down. How many pips and how often price jumps up and down is how volatile it is.

When price jumps a lot and fast, and there is a large difference in price between high value and low value during that day it means that pair have higher volatility.

If volatility is higher it means that you will be able to enter into that pair with trade without any problem and you will be able to exit at any time. When there is a high number of sellers and buyers volatility will be high and traders love that.

Buyer and seller give volatility to trading pairs. If there is a seller that is willing to sell a trading pair to a buyer at any time on the market that pair will be highly volatile. This is the same in case if there is a buyer that is willing to buy a pair at any time on the market the seller will be able to sell whenever he wants.

If there is no buyer and seller, the price of the trading pair will remain in the same place. It will not move up or down because there is no demand/supply on the market to move price in any direction. If this happens you can say the pair does not have volatility and, mostly, traders will avoid trading this pair.

The question here is to determine which pair is better to trade.

Should you trade a highly volatile pair or less volatile pair.

While you are trading on the Forex market to make some money, you are looking to make a correct prediction where the price will move.

Your job is to predict the correct direction and to make as many pips as you can.

If you predict the correct direction and the price changes only a few pips per day, you will not make money.

So, the number of pips counts. You can make the conclusion that it is better to trade only highly volatile pairs.

That is correct and you should be looking for volatile pairs, but have in mind that highly volatile pairs bring more risk. 

On a less volatile pair where you have a move by only a few pips, you will probably lose money on that trade.

When you pay for the spread you will probably be in minus at the beginning and if the market continues to stay at the same price you will need to make a decision.

Will you get out of a non volatile currency pair and take the loss or will you stay in the trade and wait for the price to move in your direction.

The waiting period with a non-volatile market can last too long.

You will encounter someone saying that volatility is closely connected to risk. Risk is something you need to incorporate in trading strategy because you never know where the market will go. You can try to predict but you will never be 100% sure.

Risk is something normal and it is ok. But where is high volatility it does not mean that there is higher risk in trading. Any trade you take on the market, on a highly volatile or low volatile market, takes risk and you need to watch out.

Whenever you open a trade there is risk that you will be on the wrong side of the market movement and trade can be negative. Volatility is only connected in a way that risk of higher loss will be on a more volatile market.

Why? Because if volatility is high you can lose more in that trade while there are more pips that can be negative. But this can only happen if you do not set stop loss.

If you open a trade with set stop loss, you immediately accept risk in that trade but that risk is controlled.

To prevent a bad scenario where your trade would close with margin call you should protect your account with defining acceptable loss.

So, be smart and open a trade always with a stop loss in case if something goes wrong. This way you will protect yourself and your asset from unwanted risk.

Volatility in the Forex market is very much wanted and the Forex market is known by the volatility.

There are some currency pairs that are more volatile than others, but any type of trader can find one currency pair that moves with desired speed.

High volatile currency pairs bring more risk because more pips can be won, but also lost in a single trade.

With more pips lost the loss on a trading account is also higher. Those who can control the risk and set stop loss on each trade will have more success in trading.